The polar vortex may be affecting oil prices

The polar vortex may be affecting oil prices

  • The drastic shifts in weather in US have affected demand for oil.
  • Refineries are using less crude oil than they did in the recent past.
  • Americans are driving less either due to the cold blast in Chicago or the heat wave in Florida
Oil prices are rising after data on Wednesday showed that the rise in American inventories was slower than expected.

Stocks gained by 1.3 million barrels in the week ended February 1, compared with analysts' expectations for an increase of 2.2 million barrels, according to the CNBC.

However, there is a little detail in the data that may be as significant for oil prices. “Look at the refinery utilisation component of the EIA data today. That’s relatively weak compared to the last six weeks or so. That’s actually showing less and less demand at the refinery site,” Bob Iaccino, Path Trading Partners told Bloomberg TV on February 6.

Refinery utilisation is the amount of crude oil consumed by refineries to produce the final output, and according to the latest data refineries are using less crude oil than they were in the recent past.

“Part of it is the polar vortex. 250 million Americans were affected by the cold blast. People in Florida were not driving their cars in 50 degree weather. Anecdotally, it affected much more of the country… We are seeing that in refinery utilisation, we are going to see it in gasoline inventories in the coming weeks,” Iaccino added.

The term polar vortex describes the mass of low-pressure cold air that circulates in the stratosphere above the North Pole. But sometimes the circulation of the polar vortex weakens, causing surges of frigid air to splinter off and drift south.

Americans consume more oil than anyone in the world. And if unpredictable weather is keeping them from driving cars, that will certainly affect how oil prices move.

It is bad news for oil exporting countries like Saudi Arabia and Russia, and good news net importers like India, which buys nearly 80% of all the crude oil it needs from abroad.

See also:
North India Is As Cold As Southern Europe Now Because Of Arctic Winds

Next global recession may be just two years away—and India should be worried